**A stock that sinks less severely during a market correction is outperforming its peers and is a sign of strength. It may be one of the first out of the gate as the market begins to rally.

**An upward price reversal at the bottom of the base with heavy volume indicating major support by institutions (this process may happen over the course of a few days and can be seen in a weekly chart).

**A long base, giving it a greater chance of a sustained breakout

**Volume dry up (decreasing selling volume) at the bottom of the base and in the handle

**Low volatility in the base and handle. An occasional shakeout is fine, but you want to see at least a few weeks of tight, quiet price action indicating a lack of speculators and a load of steady long term shareholders. A stock with a wide and loose base indicates that is in the public eye too much and calls attention to itself. Remember that stocks tend to shoot up to new highs when most people aren’t paying attention.

**A high volume gap up on the right side

**A handle that slopes downward (5-15%) with declining volume and tight price ranges. This handle should form in the upper half of the base (applicable to cup and double bottom bases).

**Volume on the breakout day at least 50% (I like a volume surge of at least 100%) higher than the average and trading volume for that week higher than the previous week. (NOTE: Average volume on the breakout may be OK as long as the volume on days following the breakout begins to increase as institutions begin to build their positions in the stock.

Calculating % Change in Volume at the Breakout
There are 6.5 hours in a trading day. If a stock trades an average of 650,000 shares per day, divide this number by 6.5 to get the hourly average of shares traded. This particular stock trades on average, 100,000 shares an hour. The next day you notice it passes its pivot point at 8:30am and the volume is 350,000. Do you buy? Yes. At 8:30am, you are two hours into the trading day and the average at this time is 200,000 shares. If the volume at the breakout is 350,000 shares, that’s 75% greater than the average. It’s a sign that institutions are starting to accumulate the stock.

**Relative strength is at a 52 week high at the breakout

**Confirmation after the breakout. You should see a few high volume advances within a week or two of the breakout to confirm that institutions are building positions in the stock.